Significant Changes to Casual Employment – Know your new obligations

The implementation of the Fair Work Amendment (Supporting Australia’s Job and Economic Recovery) Act 2021 (“Amendment Act”) on 27 March 2021 ends the opportunity for employees to ‘double dip’ on claims for entitlements and enables casual employees to request permanent employment. However, it also places significant obligations on employers of casual employees.

Under the Amendment Act, ‘casual employment’ is clarified with a statutory definition, and where an employee has been mischaracterised as a casual, relevant entitlements can be set off against casual loading paid – thereby resolving the issue of ‘double dipping’.

Importantly, employers should update casual employment contracts to reflect the recent amendments.

What has changed?

1. There is a statutory definition of casual employment. 
2. A pathway has been introduced for casual employees to move to full-time or part-time permanent employment.  This includes an express obligation on employers to offer eligible casual employees a conversion to permanent employment, and also permits eligible casual employees to request conversion to permanent employment (‘casual conversion’).
3. There is a requirement for employers to give each casual employee a Casual Employment Information Statement.
4. Employers are protected from casual employees claiming that they had been misclassified as casuals and claiming permanent employee entitlements, and therefore ‘double dipping’ on entitlements.

1.    Definition of casual employee

Under the new definition, a person is a casual employee if: 

• They are offered employment on the basis that the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person; and
• the person accepts the offer on that basis; and
• the person is an employee as a result of that acceptance.

In determining whether an offer of employment by an employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person, the following factors are to be considered:                    

• whether the employer can elect to offer work and whether the person can elect to accept or reject work;
• whether the person will work as required according to the needs of the employer;
• whether the employment is described as casual employment;
• whether the person will be entitled to a casual loading or a specific rate of pay for casual employees under the terms of the offer or a fair work instrument.

Notably, the definition focusses on the offer and acceptance of employment rather than subsequent conduct or work patterns of the employee. 

2.    Casual Conversion

The Amendment Act requires that employers must make offers to casual employees to convert their employment to full-time or part-time employment if:

• the employee has been employed by the employer for a period of 12 months; and
• during at least the last 6 months, the employee has worked a regular pattern of hours on an ongoing basis which, without significant adjustment, the employee could continue to work as a full‑time employee or a part‑time employee (as the case may be).

However, this obligation does not apply to small business employers. A small business employer has less than 15 employees at a particular time. If an employer has 15 or more employees at a particular time, they are no longer a small business employer.  When counting the number of employees, employees of associated entities of the employer are included.   Casual employees are not included unless they are engaged on a regular and systematic basis. 

Where the employee meets the above criteria, within 21 days of the 12 month period ending, the employer must make the offer to convert the employment to full-time or part-time work, consistent with their hours worked as a casual employee.

However, an employer is not required to make a conversion offer to a casual employee if there are reasonable grounds not to make the offer and the reasonable grounds are based on facts that are known, or reasonably foreseeable, at the time of deciding not to make the offer. These reasonable grounds include the following:

• the employee’s position will cease to exist in the period of 12 months after the time of deciding not to make the offer;
• the hours of work which the employee is required to perform will be significantly reduced in that period;
• there will be a significant change in either or both of the following in that period: (1) the days on which the employee’s hours of work are required to be performed or (2) the times at which the employee’s hours of work are required to be performed; which cannot be accommodated within the days or times the employee is available to work during that period;
• making the offer would not comply with a recruitment or selection process required by or under a law of the Commonwealth or a State or Territory.

If an employer does not offer conversion, the employer must give notice of that decision within 21 days of when the right to be offered conversion arose, otherwise, the employee can request casual conversion.  However, the employer can refuse casual conversion if there are reasonable grounds.

If the employees meet the eligibility criteria, they can request casual conversion later in their employment.

3.    Employee Information Statements

Employers must provide to every new casual employee a Casual Employment Information Statement, before or as soon as possible, after the commence their new job and the usual Fair Work Information Statement.

4. No more ‘double dipping’

The reforms should provide some welcome relief for employers following the controversial Full Court of the Federal Court decisions in WorkPac Pty Ltd v Skene [2018] FCAFC 131 and WorkPac Pty Ltd v Rossato [2020] FCAFC 84.  Those decisions considered the definition of casual employees in the context of casual employees claiming that they were in effect permanent employees and therefore entitled to payment for leave entitlements.  The Court held that the employer could not set off casual loading paid to employees against unpaid entitlements, which set a dangerous precedent for employers, by enabling employees to ‘double dip’ by receiving both casual loading and payment for entitlements.

The Amendment Act addresses the ‘double dipping’ concerns arising from the Rossato decision (where an employee is incorrectly classified as a casual) by permitting employers to set off ‘relevant entitlements’ owed to the employee against the casual loading paid to casual employees.  The relevant entitlements include:

• Paid annual leave
• Paid personal/carer’s leave
• Paid compassionate leave
• Payment for absence on a public holiday
• Payment in lieu of notice of termination
• Redundancy pay.

In order to facilitate this set off arrangement you must:

• Ensure that the employment agreement identifies the employee as being causal; and 
• the casual loading needs to be separately identified to compensate the employee for not receiving relevant permanent entitlements.

What if employers fail to comply?

The right to casual conversion forms part of the National Employment Standards, and accordingly, any contravention of these provisions may result in a civil penalty in excess of $13,000 for an individual or $66,000 for a company.

What does this mean for employers?

• Employers should review their contracts with existing casual employees to check whether the employees meet the new statutory definition of casual employment.  This is particularly important because the new definition of a casual employee will be determined by the terms of the contract rather than the conduct of the employee in practice.
• Employers should update casual employment contracts to reflect the recent amendments in the Amendment Act.
• Employers should review their current casual workforce to assess whether the employer should make any conversion offers to permanent employment during the 6 month transition period which ends on 27 September 2021.
• Employers must provide to every new casual employee: 
• a Casual Employment Information Statement, before or as soon as possible, after they commence their new job; and 
• the usual Fair Work Information Statement.
• Small Business employers must give to their existing casual employees a Casual Employment Information Statement as soon as possible after 27 March 2021.
• Other employers must give their existing casual employees a copy of the Casual Employment Information Statement as soon as possible after 27 September 2021.

If you have any queries regarding casual employment or need assistance with updating your casual employment agreements, please contact us as we are happy to help you. 03 9548 5500